Flask has a few assumptions about your application (which you can change
of course) that give you basic and painless Unicode support:

the encoding for text on your website is UTF-8

internally you will always use Unicode exclusively for text except
for literal strings with only ASCII character points.

encoding and decoding happens whenever you are talking over a protocol
that requires bytes to be transmitted.

So what does this mean to you?

HTTP is based on bytes. Not only the protocol, also the system used to
address documents on servers (so called URIs or URLs). However HTML which
is usually transmitted on top of HTTP supports a large variety of
character sets and which ones are used, are transmitted in an HTTP header.
To not make this too complex Flask just assumes that if you are sending
Unicode out you want it to be UTF-8 encoded. Flask will do the encoding
and setting of the appropriate headers for you.

The same is true if you are talking to databases with the help of
SQLAlchemy or a similar ORM system. Some databases have a protocol that
already transmits Unicode and if they do not, SQLAlchemy or your other ORM
should take care of that.

So the rule of thumb: if you are not dealing with binary data, work with
Unicode. What does working with Unicode in Python 2.x mean?

as long as you are using ASCII charpoints only (basically numbers,
some special characters of latin letters without umlauts or anything
fancy) you can use regular string literals ('HelloWorld').

if you need anything else than ASCII in a string you have to mark
this string as Unicode string by prefixing it with a lowercase u.
(like u'HänselundGretel')

if you are using non-Unicode characters in your Python files you have
to tell Python which encoding your file uses. Again, I recommend
UTF-8 for this purpose. To tell the interpreter your encoding you can
put the #-*-coding:utf-8-*- into the first or second line of
your Python source file.

Jinja is configured to decode the template files from UTF-8. So make
sure to tell your editor to save the file as UTF-8 there as well.

If you are talking with a filesystem or something that is not really based
on Unicode you will have to ensure that you decode properly when working
with Unicode interface. So for example if you want to load a file on the
filesystem and embed it into a Jinja2 template you will have to decode it
from the encoding of that file. Here the old problem that text files do
not specify their encoding comes into play. So do yourself a favour and
limit yourself to UTF-8 for text files as well.

Anyways. To load such a file with Unicode you can use the built-in
str.decode() method: